What does the Presidents executive action to rescind potential deportation of millions of undocumented immigrants mean for housing and mortgage lending? Some, like HUD Secretary Julian Castro, believe it may be a good thing (Read More). Any action by a President, or Congress, which would clarify immigrant status and help to increase the pool of potential qualified homebuyers would obviously benefit lending.
However, with the new ability to repay rules can lenders be confident that any undocumented immigrant can reasonably qualify for a mortgage? What might happen if something changes with their status, or a new President decides to issue a new executive order effectively reversing the one recently issued?
As of now FHA, Fannie and Freddie all require lending to be to a US Citizen or a “lawful permanent resident alien“. Accordingly an “undocumented” resident alien could not qualify for a loan insured by FHA, or one being originated for sale to Fannie or Freddie. This somewhat limits the potential lending pool.
Further, as we have had a drop off in lending to first time homebuyers and those of low to moderate income, it would seem before lenders take on the added risks associated with lending to those who are not in this country legally, we should look for ways to service those who are here legally.
I’m neither a lawyer nor Constitutional scholar; however, to the best of my knowledge, we currently have laws in this country governing the handling of immigration and those seeking to come into our country legally. Changing a word from illegal to undocumented doesn’t change the law; illegal is still illegal.
If we want to finds ways to help those interested in coming here and pursuing the American Dream, then let’s come up with ways to do so legally by changing the existing laws through Congressional action. Once that is done, I am sure the lending community will find ways to service the influx of new potential homebuyers, and will do so legally.